UPDATE 2-U.S. appeals court declines to rehear Argentina bond case
* 2nd Circuit Court of Appeals declines to full-court rehearing
* Argentina sought reconsideration of October appellate decision
* Argentina's economy ministry declines comment through spokeswoman
By Nate Raymond
NEW YORK, March 26 (Reuters) - A U.S. appeals court on Tuesday denied Argentina's request to reconsider a ruling that favored creditors who opted out of two of the country's debt restructurings.
The 2nd U.S. Circuit Court of Appeals in New York declined to grant a so-called en banc rehearing, in which the full court would have reviewed a decision by a three-judge panel of the court that went against Argentina in October.
In a brief order, the 2nd Circuit said its 13 active judges had considered Argentina's petition for a rehearing and denied it. No reason was given.
The earlier decision required Argentina, which has refused to repay bondholders who opted out of its restructurings, to treat all of its bondholders equally.
Tuesday's ruling was a set-back not just for Argentina but also the U.S. government, which had contended in court papers the earlier ruling ran "counter to longstanding U.S. efforts to promote orderly restructuring of sovereign debt."
The decision leaves Argentina with one appeal outstanding before the 2nd Circuit, after it appealed a trial judge ordering Argentina to pay into escrow the full $1.33 billion owed to the holdout bondholders.
A decision in that appeal remains pending. Argentina is expected to respond by Friday to a request by the court on March 1 for the "precise terms" for any alternative payment formula it would use to resolve the litigation.
In an analyst note Tuesday, BNP Paribas said Friday's filing "is to be seen as a window of opportunity for the sovereign to satisfactorily address the Court's interpretation of its legal obligations."
A spokeswoman for Argentina's economy ministry declined to comment.
The case stems from Argentina's $100 billion sovereign debt default in 2002. Argentina has been fighting demands for payment from the holdout bondholders, who refused to participate in debt restructurings in 2005 and 2010.
Around 92 percent of the bonds were restructured, and holders received 25 cents to 29 cents on the dollar.
Holdouts led by Elliott Management affiliate NML Capital Ltd and Aurelius Capital Management have sought full payment. Argentina calls these funds "vultures."
The decision Tuesday marked another setback for Argentina in its efforts to reverse a February 2012 decision by U.S. District Judge Thomas Griesa holding it had violated the "pari passu" clause in its bond documents requiring it to treat creditors equally.
The 2nd Circuit subsequently upheld that finding and sent the case back to Griesa to determine the how the payment mechanism would work and how injunctions the judge issued would apply to third parties and intermediary banks.
The 2nd Circuit heard arguments on February 27 on the appeal of Griesa's November decision on those issues.
Representatives for NML and Aurelius had no immediate comment Tuesday.
The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.